Human Capital Policy and Inequality: 5 of 5

“K-12 education is currently a $350 billion per year industry, yet investment decisions hinge on interpretation of evidence developed through programs implemented fifteen to thirty year ago” (Hanushek p.268)

This constitutes the last entry on Human Capital Policy. Here, I summarize comments and suggestions given by economic peers to append the analysis performed by Professors Heckman, Carneiro, and Kruegman. Succinctly, most commentators take a similar line of thought in regard to Kruegman, citing selective evidence, faulty assumptions, and large holes in analysis while supporting and expanding upon Heckman’s analysis.

In his Comments section, Professor Hanushek recapitulates and expands upon the educational reforms discussed by Kruegman and Heckman by emphasizing that “school resources more than tripled, but there has been no discernible effect on performance.” Predictably, Hanushek will side with Heckman. Kruegman’s policy suggestions primarily entailed throwing more money at the school system to reduce school size and increase teacher pay or, as Hanushek states, “Expand the current programs and organization.” (p. 253) Given that Kruegman’s policy suggestions have been more or less in the process of implementation for the past 3 decades without results, it seems strange to continue pursuing them. On the other hand, Heckman and Carneiro propose deep structural changes in the school system with specific targeting of disadvantaged groups. Upon these premises, Hanushek put their suggestions in the context of school reform, demonstrating a need to stop following old conclusions and formulas and begin accumulating results and conclusions from new experiments; otherwise, school reform policy will remain stagnant and the system that forges more inequality with each generation will stay unhindered.

Other commenters veered further away, offering additional acumen and potential areas of intervention and investigation. In her Comments section, Professor Katz warned against forgetting US’s tendency to incarcerate: “the growth in resources allocated to the criminal-justice system has far outstripped those going to further education and training for young male dropouts from disadvantaged backgrounds.”(Katz p. 275) According to Katz, this funding pattern fails to acknowledge human capital’s ability to deter illegal activity, serving more to criminalize and remove the disadvantaged than to help. Similarly, she cites the lack of knowledge we have on the effect of stigma, exclusion, mistreatment, and other outcomes of having been incarcerated. With more black men put into jail than through college, our lack of understanding may cause the absence of numerous integral factors from Heckman’s and Carneiro’s models of income and achievement gaps. Professor Katz also cites our stark lack of understanding of the community’s effect on human capital and incomes through forces such as “peer influences…school quality, safety from crime, and supervised after-school activities.”(p. 277) Although the mechanisms through which these affect children are not yet known, there is a general consensus that these do significantly influence a child’s development. Another economics, Lisa Lynch, appended Heckman’s analysis in her Comments section by remarking on our need to know more about private job-training initiatives, including on-job training and apprenticeships. Their contribution is immense and some estimate their effectiveness to be on par with returns to schooling. However, we know not the participation rates not its output nor much else as these programs tend to stay behind closed doors and obscurity.

Overall, there is agreement on the following points in regard to human capital and the resulting income inequality. The first and most obvious is that we have an enormous lacking in knowledge in regard to the formation of human capital. Heckman, Carneiro and the commentators all agree that the best way to attack the issue is to invest in knowledge that will help us form an overarching picture in the way human capital forms. In informing our research, as well as, policy we must stop tinkering and reinterpreting with old ways and results. Instead, we must unveil new experiments and new ideas. Finally, perhaps the most important of all, is the need to target policies. Many prior interventions worked for particular subsections of the population but not others. Other programs designed to help the disadvantaged end up primarily aiding those who do not need the aid and are, often, in the highest socio-economic ranks of the population. These tarnish the image of interventions, reduce their efficiency, and exacerbate inequality while failing to help the disadvantaged.

The above boil down to a somewhat existential question that we must ask ourselves: Are we willing to admit our failure to remedy the issues we are so vocal about or are we to continue bashing past results until they seem to convince us of our correctness?